Last updated on August 16th, 2024 at 09:32 am
In a decision that highlights the high cost of case backlog or delayed delivery of Justice, the Commercial Court of Uganda has awarded 103, 867,184 Uganda Shillings in special and general damages to suppliers (creditors) of Tusker Mattresses Ltd, the defunct Kenyan company that operated the Tuskys Supermarket chain in Uganda and Kenya, one year after its liquidation in Kenya.
Commercial Court Judge Patricia Mutesi (pictured) in a decision handed down on Wednesday 31st July 2024 found that the heavily indebted company had breached its contract with Fresh Care (U) Ltd and Martin Enterprises (U) Ltd with whom it had contracted over about 9 years to supply the supermarket chain with fruits and vegetables after the company failed to pay the suppliers UGX 44, 256,114 and UGX 32,611,070 UGX (special damages) respectively despite multiple demands for payment.
The learned Judge further faulted the company for secretly ceasing its operations in Uganda without informing the suppliers yet they had enjoyed a cordial business relationship together spanning about a decade, noting that this conduct caused financial difficulty in the suppliers’ business and disillusionment justifying an order for the defunct company to pay UGX 15M and UGX 12M to Fresh Care and Martin Enterprises respectively.
“As a result, it is my considered finding that the Defendant breached the contract of supply of fresh produce which it had with the 2nd Plaintiff [Fresh care] and the 3rd Plaintiff [Martin Enterprises], respectively, when it failed and/or refused to pay for all the produce it received. The Defendant [Tusker Mattresses] still owes UGX 44,256,114 to the 2nd Plaintiff and UGX 32,611,070 to the 3rd Plaintiff.” Justice Patricia Mutesi stated, adding:
“The testimonies of PW1 and PW2 revealed that, while some of their monies remained unpaid, the Plaintiffs were shocked to see, in early 2020, that the Defendant had started closing its branches without prior warning. The Plaintiffs had shared a cordial business relationship with the Defendant for close to a decade, but the Defendant did not accord them any courtesy to warn them and arrange to pay their outstanding monies before closing business in Uganda. This was most unfortunate. The ordinary, natural, and probable result of this conduct is that, firstly, it caused financial loss and hardship to the Plaintiffs who supplied their fresh produce to the Defendant without being fully paid for it. Second, it caused distress, inconvenience, and disillusionment to the Plaintiffs when their debtor closed business and left the jurisdiction without responding to their demands for payment. In view of all this injury, the Court awards general damages of UGX 15,000,000 to the 2nd Plaintiff [Fresh care] and general damages of UGX 12,000,000 to the 3rd Plaintiff [Martin Enterprises].”
Tuskys Supermarket, once one of Kenya’s leading supermarket chains, is no longer in operation following a High Court of Kenya order for its liquidation in June 2023.
Unable to recover from its financial troubles, with debts amounting to nearly 20 billion Kenyan Shillings, while its assets were valued at only 6 billion, High Court of Kenya Justice David Majanja, who presided over the company’s creditors’ liquidation petition, found that there was no viable path to revive the struggling supermarket chain.
“Tuskys must now be put to death to stop the suffering of unsecured creditors. It must now be liquidated.” Justice David Majanja is reported to have said.
Now, the present lawsuit was filed in the Commercial Court of Uganda in 2020, slightly before the total exit of the Supermarket chain and it had even filed a defense to the suit.
That filing coincided with the creditor’s liquidation petition in Kenya which eventually brought the company to its end.
Although cross-border insolvency practice in the East Africa region is still in its nascent stages, it appears fair to believe that had the present lawsuit been determined in time – that is, between 2020 and 2023, perhaps, armed with the court Judgement, the suppliers – Fresh care and Martin Enterprises would have been in position to seek legal assistance to partake in the distribution of whatever assets the company had during the liquidation proceedings in Kenya under the principle of comity.
In the case of Christopher Sales and Carol Sales v. Attorney General, the High Court of Uganda dealt with the question of whether a Judgement creditor armed with a judgment from the USA can enforce it in Uganda.
It was held that a judgment creditor armed with such a judgment, even in the absence of a reciprocal arrangement between the two nations, should be allowed to realize the fruits of his judgment and should be afforded recognition by Ugandan courts.
As some legal experts have stated, while “we move towards full economic integration of the East African Community, there is a need for administrative reforms by all member states to address the challenges posed by cross-border insolvency” including case backlog.
Parties: Cosmas Nzonzo & Ors v. Tusker Mattresses (U) Ltd. Counsel: Nyachieo Mary of M/S Anguria & Co. Advocates (for the Plaintiffs). Defendant unrepresented.
